Corruption is a threat to democracy, and public perceptions of it are a major factor in determining how widespread and detrimental it is. Talk about it. (Answer in 150 words)
Priority Sector Lending (PSL) mandates increased lending by the banks towards specified sectors and activities in the economy, which may not get timely and adequate credit in the absence of the special dispensation. Presently, categories under priority sector include Agriculture; Micro, Small and MeRead more
Priority Sector Lending (PSL) mandates increased lending by the banks towards specified sectors and activities in the economy, which may not get timely and adequate credit in the absence of the special dispensation. Presently, categories under priority sector include Agriculture; Micro, Small and Medium Enterprises; Export Credit; Education; Housing; Social Infrastructure; Renewable Energy; and Others. The rate of interest on PSL loans is charged as per the directives of the RBI.
Challenges with Priority Sector Lending in India:
- Sectoral issues: Doubling credit to PSL in the agricultural sector leads to an increase of just 11% of total credit in the agricultural sector as compared to 76% in the export sector and 41% in manufacturing sector. Also, agricultural sector’s susceptibility to vagaries of monsoon increases the credit risks of banks under PSL.
- Lethargy in lending: Most public sector banks have been continuously underperforming on the total priority sector target. This may be due to difficulty in finding viable options to lend to the rural areas or the MSME sector.
- Rising NPA: The Second Narasimham Committee (1998) observed that directed credit led to an increase in non-performing loans and adversely affected the efficiency and profitability of banks. It stated that 47% of all non-performing assets have come from the priority sector.
- Costs of PSL in India: It hinders the banks from expanding their scale of lending, consequently, affecting the banking industry and the flow of credit in the economy as a whole. It also impacts the general lending power of banks and deposit rate, which ultimately impact the general public.
Notwithstanding the challenges, PSL has proved useful for the following reasons:
- Promotes equity: It promotes social equity and facilitates increase in employment and investment in less developed regions and gives an impetus to the vulnerable sections of the society.
- Balanced development: Direct lending allows the commercial banks to generate high social returns along with profits and it also contributes to economic development by increasing investment in strategic sectors like exports.
- Credit formalisation: It increases institutional credit (including commercial banks, cooperative banks and societies) to the agriculture sector compared to non-institutional credit (such as money lenders).
Despite the challenges, the policy of priority sector lending (PSL) target has benefitted the vulnerable sections of society, which though creditworthy, are unable to access the formal banking system for adequate and timely credit. In this context, to make the PSL policy more effective, various steps such as Priority Sector Lending Certificates, timely revised guidelines by the RBI, continued increase of the target under PSL year-on-year, etc. have been taken, which are steps in the right direction.
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Corruption is a multifaceted phenomenon, linking multiple issues together such as abuse of entrusted power for private gains, lack of integrity, taking bribes, maladministration, fraud, and nepotism. It is a challenge to democracy in following ways: It tends to threaten the basic social and economicRead more
Corruption is a multifaceted phenomenon, linking multiple issues together such as abuse of entrusted power for private gains, lack of integrity, taking bribes, maladministration, fraud, and nepotism.
It is a challenge to democracy in following ways:
The citizens estimate corruption in several ways, for example, citizens estimate the trustworthiness of the public organizations, social institutions as well the government of the country and in turn their acceptability and hostile attitude as well participation towards corruption shapes up. Further, the citizens watch how frequently the different forms of integrity-violating actions take place in public administrations and how deep rooted they are.
This estimation and perception of corruption by citizens can have following impact, which is harmful and help in widespread prevalence of corruption due to following reasons:
Thus the proper diagnosis of the causes and logic behind corruption play an important role in combating it. Maintenance of diverse forms of citizen participation, independent and self-regulated media, a high level of education, ensuring transparency and accountability will contribute towards a lower level of corruption.